Madison Wisconsin's Estate Planning Blog

This year has been unprecedented from a political perspective in many ways. President Joe Biden stepped into office facing huge obstacles related to the COVID-19 pandemic, an economy battered by the pandemic, a crumbling national infrastructure in dire need of repair, an ongoing immigration crisis at our southern border, and deep political and social divisions in this country, among other challenges.

Do you know that, according to the National Association of Home Builders, May is National Home Remodeling Month? Many people associate spring with cleaning out the old, brushing off the dirt accumulated from the long winter, and starting projects around the house that have been neglected for far too long.

Perhaps, however, your home is fine as is and you need a remodeling project for something other than your home. Estate planning is one area that often goes unexamined and neglected. Is it time to remodel your estate plan? If so, is that something that you can (or should) do on your own?

In honor of Teacher Appreciation Week, the first week of May, we are taking this opportunity to thank you for your time and dedication to teaching the future generation. You provide the foundational knowledge necessary to ensure the success of tomorrow’s leaders. We are here to make sure you have the foundational estate planning documents to ensure your own successful future. Below are some basic questions and answers about estate planning and how estate planning, or the absence of an estate plan, may impact your life.

An often misunderstood but common estate planning tool that can appear in estate planning documents is the power of appointment. Not to be confused with a power of attorney (the document that allows you to delegate certain powers to an agent to act on your behalf while you are still living), a power of appointment can be an incredibly useful tool if used properly and knowledgeably.

A well-considered power of appointment allows you to maintain significant flexibility in your estate plan now and in the future, even when that estate plan is otherwise considered irrevocable under the law. Though hundreds of pages of books, scholarly articles, court decisions, and tax regulations have been written on the topic of powers of appointment, this newsletter can help you identify opportunities in which powers of appointment may be useful and recognize cases in which they can create negative consequences.

What Is a Power of Appointment?

Broadly speaking, a power of appointment is a right granted in a legal document, including in a will or a trust, by an individual (the donor) to another person (the donee or the power holder).
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Most people are shocked to learn that their retirement accounts can be seized once they pass to their loved ones. During your lifetime, your retirement funds have fairly comprehensive asset protection, meaning they cannot be taken in a lawsuit. Unfortunately, as soon as retirement accounts are inherited, the protection evaporates in most states. This means your hard-earned money can legally be snatched by your beneficiaries’ creditors and the courts.

As estate planning attorneys, we constantly look for ways to protect our clients and their loved ones, as well as their money and property.
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What Is a Trust Protector?

Traditionally, the three roles that must be filled when setting up a trust are the settlor (also called a grantor, trustor, or trustmaker), the trustee, and the beneficiary. All three roles are necessary to create a trust that functions properly. Although it is relatively common to use trust protectors in foreign asset protection trusts, a trust protector is a fairly new role in trusts drafted in the United States for estate planning purposes. However, as the number of trusts designed to last for generations grows, estate plans need more built-in flexibility. Giving a trust protector, through the terms of the trust, certain powers over the trust, such as removing or appointing trustees, adding or removing beneficiaries, and amending or even terminating the trust, ensures that your intentions for creating the trust are fulfilled despite changing law or circumstances.
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According to a 2019 survey conducted by the Pew Research Center, 7 percent of surveyed adults were living with an unmarried partner, up from 3 percent in 1995.^[1] More people such as yourself are entering long-term committed relationships without getting married. Unfortunately, many state and federal laws do not protect unmarried couples as they do married couples when it comes to inheritance, taxes, and decision-making powers. Therefore, it is important that you engage in comprehensive financial and estate planning, because without proper planning, your beloved partner could end up with nothing should you pass away.
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Estate planning is essential for everyone, but it is especially important if you and your partner are in a long-term committed relationship and are not married. Unless you plan properly, your partner will not receive any of your money or property when you pass away and will be unable to care for you when you most need it. Instead of your partner, your family members will be in charge of your financial and medical decisions and will receive your money and property upon your death. To ensure that you give money, property, and decision-making authority to those you want to have them, your estate planning tool kit must be properly stocked. In particular there are seven important documents you should consider when discussing your plans with an experienced estate planning attorney.
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